Clean Energy Investors Flash Cash in California Climate Battle

Aug. 20 (Bloomberg) -- California’s clean energy investors
are raising millions of dollars for an advertising battle with
oil refiners who want to delay the state’s new law on reducing
greenhouse gas emissions.

The campaign, supported by investors such as Tom Steyer,
founder of San Francisco-based hedge fund Farallon Capital
Management LLC, aims to convince residents to vote against the
so-called Proposition 23 when it comes up for approval in
November. The proposal, backed by the oil industry, would delay
laws to begin regulating the state’s carbon emissions in 2012.

California’s Global Warming Solutions Act, signed into law
by Republican Governor Arnold Schwarzenegger in 2006, requires
the state cut output of greenhouse gases linked to climate
change to their 1990 levels by 2020. The state will introduce a
cap-and-trade program to put a price on carbon emissions and
trade pollution rights.

“It would be a big setback for clean energy in the U.S. if
California’s climate-change law is overturned,” Kevin Parker,
the global head of asset management for Deutsche Bank AG, said
in a telephone interview.

If the most populous state backs away, it would give other
states and the federal government “a free pass to do nothing”
on curbing greenhouse gases, said Parker, who oversees about $7
billion to $7.5 billion in climate change related investments as
part of about $700 billion in funds.

Tesoro Corp. and Valero Energy Corp., which operate
refineries in the state that would face extra costs under a cap-and-trade system, have contributed most of the $6.16 million
raised to lobby for Proposition 23, according to the California
secretary of state’s office.

‘Common Sense’

Valero, based in San Antonio, Texas, has 1,600 employees in
the state and supports the measure as a “common sense approach
to making sure higher costs don’t further hamper California’s
economy,” said Bill Day, a Valero spokesman. Lynn Westfall, a
spokesman for Tesoro, also based in San Antonio, declined to
comment on the proposition.

Supporters of the carbon law, which include companies
involved in the hunt for energy from non-traditional sources
such as fuel cells, the sun, algae and the wind, have raised
$5.56 million from mostly environmental groups and investors,
according to state records.

Most of the more than $11.5 million raised so far by the
two sides will be spent on television and radio advertising,
said Robert Stern, President for the Center for Governmental
Studies, a Los Angeles-based non-profit public policy group.

Farallon Capital

The marketing blitz has yet to hit the airwaves, Stern said
in a telephone interview. “The best bang for your buck comes
after Labor Day when people start paying attention,” he said.
Labor Day is Sept. 6.

Steyer, at Farallon Capital, has contributed $2.5 million
and pledged another $2.5 million, according to state records and
a campaign statement.

“Proposition 23 is designed to derail a green technology
revolution that we are in the early innings of and that is the
engine for California’s growth,” Steyer said in an interview.

Steyer, who is co-chair of a campaign opposing Proposition
23 along with former U.S. Secretary of State George Shultz, said
he did not have a “meaningful percentage” of his investments
in clean tech companies.

Steyer and his wife donated about $40 million for a
renewable energy center announced in 2009 at Stanford University
in Palo Alto, California, he said.

John Doerr, a partner at Menlo Park, California-based
Kleiner Perkins Caufield & Byers and an investor in fuel cell
maker Bloom Energy Corp., has given $500,000 to the campaign,
state records show.

Investor’s View

Companies involved in renewable energy are ready to pour
more cash into the campaign if needed, said Steve Westly, an
alternative energy venture capitalist and former State
Controller who opposes the ballot initiative.

Vinod Khosla, founder and partner of Menlo Park,
California-based Khosla Ventures, said he would reevaluate his
investments in the state if Proposition 23 passes. Khosla
Ventures said it raised more than $1 billion last year for
investment funds focused on the clean energy industry.

“If there is not a clean-tech market in California, you
will see people look in India and China, where there are
markets,” Khosla said during an event on Aug. 10 at Google Inc.
headquarters where speakers voiced support for California’s
greenhouse gas laws.

Jobs Requirement

Proposition 23 would halt the program for cutting
greenhouse gases until California’s 12.3 percent unemployment
rate falls to 5.5 percent for four consecutive quarters.

Since 1970, there have been three periods when the state’s
jobless rate has fallen that low for that long, according to an
analysis of the ballot measure by the state’s Legislative
Analyst’s Office, a non-partisan agency that works for
legislature.

It’s likely that the state’s greenhouse gas laws would be
suspended for many years given economic forecasts that project
unemployment staying above 8 percent for the next five years,
according to the analysis.

“No one has a crystal ball about when the unemployment
rate will come down, but it’s almost certain that without
Proposition 23, rates will remain higher for longer,” said
Anita Mangels, communications director for the California Jobs
Initiative, which formed to support Proposition 23.

Unless the carbon law is linked to the unemployment rate,
it will needlessly funnel money to non-traditional energy
companies and boost gasoline prices, hurting the economy and
causing job losses, opponents of the carbon law said.

Taxpayers and energy consumers are “guaranteeing the
investments of venture capitalists in businesses that will be
subsidized heavily by the state, with a market guaranteed by the
state and their competition dampened by the state,” Mangels
said in a telephone interview.

Delaying the enforcement of the climate-change law will
give California’s economy time to recover so it can handle the
greenhouse-gas limits, Mangels said.